The Farm CPA

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

Take Advantage of the New HIRE Credit

May 05, 2010

Congress recently passed the Hiring Incentives to Restore Employment (HIRE) Act. This act provided a couple of new credits that in a lot of cases will help our farmers.

The first credit is basically a direct reduction in the 6.2% employer FICA cost for new employees hired who have been un-employed after March 18, 2010 and before the end of the year. This credit will be claimed on your form 941 (or in most cases, the form 943 filed by farmers at the end of the year). In order to claim the credit, you must get a Form W-11 from the employee that states they have not been employed for the previous 60 days. This credit can add up fairly fast.

For example, assume a dairy farmer hires three new employees making $3,000 per month who were un-employed. For the nine months ended December 31, 2010, they would have been paid $81,000 in wages and the employer's FICA portion would have been $5,022. This cost is completely eliminated by the Act. This also allows you not to have to make this deposit during the year for these particular taxes.

The other credit is a general business credit of up to $1,000 per employee hired that you can claim on your 2011 tax return. To claim this credit, you must have retained the employee for 52 consecutive weeks and the credit is equal to the lessor of $1,000 or the 6.2% of wages paid. If you pay wages of at least $16,129, then you will qualify for the maximum credit. Again, this is a business credit, so you are not guaranteed an immediate benefit and you will need to reduce your wage deduction by the amount of the credit.